MASTERING THE CUBE Overcoming Stumbling Blocks and B u i l d i n g a n O r g a n i z a t i o n t h a t Wo r k s
REED DESHLER, KREIG SMITH, AND ALYSON VON FELDT
A Leaderâ€™s Guide to Orchestrating Complex Organizational Change
CONTENTS Alignment and the Multifaceted Organization
Chapter 1: How to Approach Structural Change Stumbling Block 1: Boxology . . . . . . . . . . . . . . . . . . . . . . . . . 13 Building Block 1: Align All Systems . . . . . . . . . . . . . . . . . 16
Chapter 2: How to Design the Right Organization Stumbling Block 2: Off-the-Shelf Organizations . . . . . . 40 Building Block 2: Tailor to Strategy . . . . . . . . . . . . . . . . . 41
Chapter 3: Who to Involve in the Alignment Process Stumbling Block 3: The Secret Society. . . . . . . . . . . . . . . . . 55 Building Block 3: Co-create. . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Chapter 4: When to Select the Right People for New Jobs Stumbling Block 4: Starting with Names . . . . . . . . . . . . . . 70 Building Block 4: Staffing Follows Structure . . . . . . . . . 72
Chapter 5: How to Lead Alignment Stumbling Block 5: “Real” Work . . . . . . . . . . . . . . . . . . . . . . . 79 Building Block 5: Become an Alignment Leader . . . . . . . 80
Chapter 6: How to Accomplish Goals using Alignment Stumbling Block 6: Grow or Cut . . . . . . . . . . . . . . . . . . . . . . 97 Building Block 6: Resource and Reduce . . . . . . . . . . . . . . . 98
Chapter 7: How to Embrace Simplicity and Complexity Stumbling Block 7: The Simplicity Complex. . . . . . . . . . 114 Building Block 7: Absorb Complexity . . . . . . . . . . . . . . . . 114
Chapter 8: When to Align Stumbling Block 8: One and Done . . . . . . . . . . . . . . . . . . . 127 Building Block 8: Design Fluidly . . . . . . . . . . . . . . . . . . . . . 131
Mastering the Cube Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
ALIGNMENT A N D T H E M U LT I FA C E T E D O R G A N I Z AT I O N We humans have a brilliant ability to organize ourselves into groups and plan out how to get our work done. We have evolved to collaborate. We love it. We crave it. We cannot live without it, quite literally. As a result, the world we live in today is filled with the largest and most complex organizations ever knownâ€”organizations that span markets, channels, disciplines, functions, and even industries and continents. We have outdone ourselves. Coordination, collaboration, and change in these organizations are exquisite challenges. In the past few decades, we have benefitted from spectacularly innovative technologies that make coordination easier than in the past. Yetâ€”or thereforeâ€”organizations continually grow more complex and the demands on leaders become ever more challenging. The leader of a large department, division, corporation, government entity, or nonprofit organization stands at the pinnacle of this complexity. When the enterprise strategy changes, when growth is mandated, or when marketplace performance must be stimulated, it falls on the leader to spearhead organization changes that will deliver new results. Indeed, leaders
at all levels are responsible for effecting change no matter where they fit in the complex organizational ecosystem. This is an incredibly daunting responsibility given the enormous stakes. Billions of dollars (or yuan or euros or yen) may be at risk, as well as thousands of livelihoods, the world’s intricately interconnected marketplaces, and the limited resources of our precious planet. The message of this book is that no matter how large the organization or how significant the strategic changes required, the only way leaders will generate sustainable enhancements to organizational performance is by ensuring that all the elements of their organization are optimally aligned to the enterprise strategy. Let’s consider the experience of one business leader, Peter Sun, as he faced significant organizational change. At the launch of a major realignment of a marketing business to deliver a new, more sophisticated, experience-driven strategy, Sun presented what we thought was a superb analogy. “This is going to be like solving a Rubik’s Cube,” he told his team. “When you look at one of the sides of the cube and start making changes, it’s going to scramble all of the other colors.” Sun saw the organization as a giant Rubik’s Cube and his role as the alignment leader responsible for getting all the sides composed correctly. His analogy was meant to prime his team to take a comprehensive, multifaceted approach to organizational design—an effort that would require them to view the organization not as divisions and departments but as an integrated, complete system. Finding the right configuration would demand patience and tenacity. At times, they would develop a distinctive new process but it would be impossible to execute without modifying the interactions among departments. Redrawing the organization chart might bring focus to new marketing priorities but at the same time break crucial links for maintaining strong product knowledge. The team might feel like maddened Rubik’s Cube novices, trying to hit upon the one successful alignment among literally 43 quintillion flops. It may not be surprising to learn that the Hungarian inventor of the Rubik’s Cube, Erno Rubik, was educated as an architect and was fascinated with puzzles. He designed the Rubik’s Cube when he became absorbed with the problem of connecting small blocks together so they could move
independently without falling apart.1 That is also what an alignment leader does—finds ways to connect the moving pieces of an organization so they can work together in a flexible yet unified way. Michael D. Watkins, in a June 2012 Harvard Business Review article titled “How Managers Become Leaders,” discusses the importance of becoming an organization architect, or what we’re calling an alignment leader. He writes that leaders “must become responsible for designing and altering the architecture of their organization—its strategy, structure, processes, and skill bases. To be effective architects, they must think in terms of systems. They must understand how the key elements of the organization fit together and not naïvely believe . . . that they can alter one element without thinking through the implications for all the others.”2 They cannot twist one side of the cube without affecting the other sides. Our belief is that all enterprise leaders should consider themselves alignment leaders along with the other roles they play. Chief executives should know that their duties include serving as the Chief Alignment Officer (CAO). Because chief executives are ultimately responsible for product, profits, and people, they must also attend to the health and effectiveness of the very organizations that deliver these benefits for their constituents. Leaders can do this more effectively when they realize that the organization is like a complex Rubik’s Cube and the puzzle is solved—the game is won—by adjusting the blocks so that the colors on all of the sides are aligned. Alignment leaders make choices about how to reposition, redesign, or retool each of the organization’s many facets until they can effectively work together to deliver the strategy. Organizing choices drive results. Organizing choices based on sound principles and aligned together lead to marketplace wins. Of course, people throughout an organization are always making organizing choices and impacting strategy. It is not just the leader who does it. New products are being developed. New practices are being put in place. New relationships are being forged. While all this brilliant collaboration is going on, an insightful leader must be watchful to ensure that the various efforts are harmonized to impact the overall strategy in a positive way rather than to optimize the well-intentioned but sometimes misaligned smaller goals of a certain function, subsystem, or individual agenda.
Much has been written about the leader’s role in imagining and articulating the enterprise vision, in developing strategies and communicating them simply and forcefully. Less has been said about how to constantly build, rebuild, and coordinate all of the work processes and hierarchies inherent in a complex organization to realize those strategies. This is what alignment leaders think about. Alignment leaders are passionate about optimal organization alignment to strategy. Most business leaders hold this ideal, but it can be difficult to pull off. In the absence of adequate insight about how to coordinate design choices throughout an enterprise, leaders sometimes come to rely on faulty practices or myths they have observed throughout their careers. In this book, we identify eight such stumbling blocks that we have seen repeatedly. While some of these practices can result in small missteps with little consequence, others can inflict real damage to the organization, destroy the bottom line, and land leaders flat on their faces. For example, many executives begin redrawing an organization chart when they are not seeing adequate focus on a given product, customer group, territory, channel, or other concern. It seems reasonable that changing reporting relationships would promote a new emphasis in some areas and demote groups that play a role less critical to strategic success. But relying on structural change without considering the implications across the organization is like trying to solve only one side of the Rubik’s Cube. Toward the overall goal of winning the game, such a move is almost always inadequate and may even be harmful. Important connections may be unintentionally broken by new reporting relationships. New measures may be required to gauge the success of new groups. Decision-making rights may need to be renegotiated. Like a kid on Christmas morning, uninformed organization aligners (alignment leaders) may somehow luck into solving a Rubik’s Cube but will more likely scramble the puzzle even further. As Watkins wrote, “Too often, senior executives dabble in the profession of organizational design without a license—and end up committing malpractice.” They “target elements of the organization that seem relatively easy to change, like strategy or structure, without completely understanding the effect their moves will have on the organization as a whole.”3 Their efforts can replace the
existing disarray with a new set of problems, or even worse, jumble an organization into utter chaos. Hoping for a big payoff, these leaders are disappointed when results don’t show any improvement. In this book, we will explore the 8 Stumbling Blocks that we see most often in our consulting practice. These are misguided moves intended to address common considerations that alignment leaders weigh as they embark on change, but they do not result in systemic alignment or improved marketplace success. They are beliefs about how to make organizing choices that are intended to improve the bottom line, but in reality only cause pain without any gain. Unexamined, they will continue to trip up leaders and slow or even halt progress. To avoid these stumbling blocks, leaders need sound techniques to accomplish their marketplace goals. So for each stumbling block, we offer a countering building block—a solid principle or method for leading organization alignment. By replacing the 8 Stumbling Blocks with 8 Building Blocks, business leaders can more effectively design their way to a winning organization. The overarching secret is optimal system alignment to strategy. Below is a synopsis of the 8 Stumbling Blocks and 8 Building Blocks that we will detail in this book, showing you just how to avoid falling into these common traps and instead take action that will create a fully aligned organization: For Approaching Structural Change Stumbling Block 1: Boxology. This is the belief that redrawing the boxes on the organization chart is the secret to better results. Structure change is the only card that some leaders ever play in the role of lead organization aligner. But that is like trying to achieve a uniform color on only one face of a Rubik’s Cube while ignoring the kaleidoscope that is the rest of the system. Building Block 1: Align All Systems. Effective organization alignment considers all the facets of the enterprise, and it ensures that your strategy, capabilities, and choices work together to generate the results you desire.
For Designing the Right Organization Stumbling Block 2: Off-the-Shelf Organizations. This is tackling organization structure change as if it were a multiple-choice question. It’s false to assume there is a small set of templates to choose from to get the organization chart right. Building Block 2: Tailor to Strategy. Your organization’s structure should be as unique as your organization’s strategy and should be informed by that strategy. Furthermore, the other organization elements with which the structure is enmeshed should be tailored to your strategy as well. Strategic teams can work together to clarify strategic direction and strategic trade-offs, then embed these decisions deep in the design of the organization. For Choosing Who to Involve in the Alignment Process Stumbling Block 3: The Secret Society. This is the misguided belief that organization alignment is the covert work of a select few. You see it in action when leaders seclude themselves in a conference room on Friday afternoon and then announce the new organization chart on Monday morning. Omitting the broader expertise of top directors, managers, and other experts will not only result in faulty organization alignment but will also lead to slower and less effective implementation of the plan. Building Block 3: Co-create. The more people who are involved in alignment deliberations, the more likely it is that the effort will generate substantial organization and behavioral change. The benefits of widespread involvement clearly outweigh the downsides. For When to Select the Right People for New Jobs Stumbling Block 4: Starting with Names. Leaders who start with the skills and abilities of their most valued associates and build an organization from there have encoun-
tered this pitfall. They may align their organizations to their people, but they won’t necessarily create alignment between their organization and their strategy. Building Block 4: Staffing Follows Structure. It’s better to align individual strengths to strategy as embodied in the new structure. You might have to wait for the organization alignment process to unfold before you can determine who will fit where, but when you patiently fill roles with people who possess the right skills and abilities for the new jobs, you enable the new structure to reach its full potential. For How to Lead to Alignment Stumbling Block 5: “Real” Work. Speeding through organization alignment in order to get on with “real” work is a major stumble. When organization alignment efforts are viewed as a distraction from what actually makes an organization hum, it is clear that the leader has not yet recognized that one of his or her most critical roles is that of alignment leader. Building Block 5: Become an Alignment Leader. Alignment leaders know that organization design is a process to solve problems and that bringing other people along to think about alignment generates enormous power for the organization. We will describe the distinct set of characteristics that define an alignment leader. For How to Accomplish Goals using Alignment Stumbling Block 6: Grow or Cut. This is the false belief that a business can either increase revenues or shrink expenses, but not both at the same time. Building Block 6: Resource and Reduce. Alignment leaders don’t despair when they are faced with both growth and savings targets simultaneously. They know it is possible to have it all—and they know how to protect and cut work strategically.
For Embracing Simplicity and Complexity Stumbling Block 7: The Simplicity Complex. There is a lot of talk about how much consumers want simplicity in the form of elegantly integrated products and customized solutions. But most existing organizations are not built for these new kinds of offerings, and they may not realize how much re-architecting is called for. They make the mistake of adapting their strategy without adapting their own organization. Building Block 7: Absorb Complexity. Organizations that choose to absorb complexity for their customers are prepared to develop new capabilities, and they know that these new capabilities will require them to make some trade-offs. For Knowing When to Align Stumbling Block 8: One and Done. Complete alignment of an organization can feel like a massive undertaking. Consequently, there is a tendency to want to create the perfect organization design once and for all. Leaders who are out to create a flawless new organization in one fell swoop are setting themselves up for disappointment. Building Block 8: Design Fluidly. A better mind-set is to be continuously remaking the organization to track new marketplace conditions and the resulting strategic adjustments. Designing fluidly means moving smoothly and constantly to tweak organization alignment. Now of course we cannot provide formulas for aligning a complex organization that leaders can learn by rote and execute without customization, but we think there are systematic ways of approaching the alignment problems that leaders face, and these are encompassed in the 8 Building Blocks. We have seen these approaches work consistently in companies, governments, and nonprofits of all sizes and types around the world. If you build your approach on these methods, you can feel confident that your organization alignment efforts will result in real change.
What Does It Mean to Master the Cube? The cube we have in mind when we use the title metaphor of this book is the multifaceted organization in its entirety—all of its strategies, processes, structures, systems, practices, and metrics, as well as the skills, values, and beliefs of its people. Mastering this cube means knowing the most effective techniques for approaching and orchestrating complex organization change so that all of these components come into alignment. It means thinking systemically, anticipating both the desirable outcomes that will result from a design choice as well as the reverberations likely to be felt in other parts of the enterprise. The word “master” connotes the ability to direct or perform something skillfully. If you know how to master an organization, you are skilled at orchestrating all its disparate parts so they work well together. An expert alignment leader is a master of the organizational cube. To help you become a master of the cube, we demonstrate in each chapter how the 8 Stumbling Blocks and 8 Building Blocks often play out in real-life situations. We present a list of key concepts for leading successful organization alignment efforts, which we add to as the book proceeds and consolidate at the end. We wrap up each chapter with a set of questions to consider as you apply what you have learned in your own work. Along the way we offer some alignment aphorisms that together with the building blocks condense some of the most important ideas. We gather these in the last chapter as well. The happy truth is that a surprisingly simple series of discussions can help leaders of even very large and intricate organizations create an enterprise that is aligned, top to bottom, to the singular goals of the enterprise strategy, one that is adept at continually and quickly re-creating itself in our ever-changing world. Such an approach makes organization innovation much more likely—people developing novel organizations that give them an advantage in their realm. Organization alignment needs neither to be overwhelming nor naïve. Nor should it be a singular endeavor, an all-out, distasteful, stopthe-machines upheaval. Rather, every leader should become familiar with positive practices based on solid building blocks for aligning an organization and keeping it aligned. It is one of the most crucial skills needed in commerce, in government, and in nonprofit organizations today.
What You Can Do Now This book is meant for alignment leaders; that is, executives and others responsible for making organizing choices to see their companies, foundations, institutions, communities, or other groups to success. It is also meant for those who support and facilitate organization alignment work, such as partners and other practitioners in human resources, organization effectiveness, organization design, strategy, information technology, and process or continuous improvement (e.g., Lean Six Sigma). We will refer to all of these roles as change partners. Because, as we will argue, organization alignment should be an interactive process, both the executive role and the partner role are essential. One cannot delegate all the responsibilities for organization alignment to the other. The most beneficial way for any reader to use this book is to bear in mind an organization alignment challenge that is before you now. Sometimes these situations arise due to business performance issues; other times they surface when you aspire to build an institution that is even better than it is today. Either way, we suggest that you select a situation that is tough, that is multifaceted and will require the action of multiple levers, and that may impact the thinking of many people in your organization. At the end of each chapter, we present specific questions and applications to help you personally use the building blocks highlighted in this book. We also encourage you to invite your organization alignment partners (your change partners) to read this book as well, then share your thoughts and notes from the end of each chapter. Discuss the truths and positive practices you can use to rise to the challenge of your specific situation. Discuss how you can work together to meet your common goals. To get started with your exploration, answer the questions that apply to your role. If you are an alignment leader: • What business challenge are you currently facing that seems to lie just beyond or under the surface of the obvious fixes or solutions? • What would your organization be like in the future if you were able to effectively address this challenge?
• What are the consequences now and in the long-term if you are not able to handle this challenge? • What have you tried so far? What has worked? What has not worked? If you are a change partner: • What organizational challenges do you see your organization struggling with? Think of issues that seem too complex or too sensitive to address. • What do leaders seem most concerned about solving? • What would be the consequences now and in the long-term if the organization were not able to effectively address these challenges? • What have you tried so far to either address these challenges yourself or to partner with a leader in the organization to tackle these challenges? For both alignment leaders and change partners: • Have you spoken to the other about your thoughts and concerns? • What plans or approaches have you jointly been able to conceive for addressing these challenges?
AlignOrg Solutions is an international consultancy serving enterprises of all sizes and types to clarify strategy, align organizational choices, build organization capabilities, manage and implement change, and develop alignment leadership. The firm offers a high-engagement approach, exceptional alignment tools, and hard-won expertise in leading organization transformation projects. They are respected worldwide for helping leaders and their change partners align the choices in their organizations with a differentiated strategy for future success.
To learn more, please visit masteringthecube.com.